There has been some angry buzz around Google’s wanton transcoding of web pages. This was inevitable, since transcoding by nature rewrites pages for mobiles.
One thing that I think all transcoders (and some that lightly transcode RSS <wink>) are missing is that they strip out all images and sometimes even links (or like Google, replaces links with proxy links) without the users knowing or allowing the user to access the removed items. I think a generous tweak of the browsing UI could do much to help this issue.
As for the real munging of sites, that will always be the case with transcoding. But, as David says, a bit of device detection and a clever proxy will redirect to sites that already have mobile-friendly versions.
From my perspective, the issue is not that Google unilaterally strips away eye candy only to deliver a hodgepodge of text on mobile devices. It is that you remove user access to mobile-specific services on which ours and many other businesses are based. By default, your actions censor those of us who provide a unique and/or useful mobile experience.